How blockchain technology makes real estate market more efficient

The blockchain network as a breakthrough to the internet and digital industry has got a lot of advantages as well as some risks. Investment on tangible assets in the crypto market is one of the most important and game changing advantages that blockchain has brought to the market.

Investors from all around the world are only a few clicks away from buying or selling almost all types of real world assets if the assets are tokenized and stored in a blockchain network.

Specifically, the real estate market will become significantly efficient, by making the properties available across the blockchain network.

Now, let’s see what a tokenized tangible asset is and  how it is about to make revolutionary changes to the real estate market.

What is a tokenized tangible asset?

Almost every asset that physically exists in the real world can be tokenized. A barrel of oil, a tone of wheat, a valuable painting or a piece of diamond can be converted to one or multiple tokens and traded across the blockchain network. Think of a piece of diamond which is valued at USD 1 million. This is obviously out of most investors’ budgets. However, through tokenization, it can be converted to say 1000 tokens, valued at USD 1,000 each. It goes without saying that many investors are now able to invest in diamonds by purchasing one or more diamond-backed tokens. The authenticity and ownership of tokens, which are basically a fraction of that piece of diamond, will be securely stored in the blockchain network and can be traded between investors 24/7/365. How good is that? The same thing can be done for other assets such as a property!   

How blockchain revolutionizes the real estate market?

There are several interesting and game changing advantages that blockchain has brought to the real estate industry. Here are some out of many. 

1- Fractional ownership

Through tokenization, fractional property ownership is now possible. Like the diamond example that we specified earlier, a valuable property like a fancy apartment in Dubai Marina, can be converted to multiple tokens and be traded across the blockchain network. The real estate industry will benefit from a lot of small scale investors in the market who are eager to purchase a fraction of a property. From investors’ perspective, this is a great opportunity to not only take advantage of the capital growth but also make a secure passive rental income of that property on a pro rata basis.

2- Liquidity 

The real estate market has always been considered as an illiquid market. The seller must be waiting for a buyer who is capable of paying a lot of money to buy the property. Besides, the market for an actual property, in most cases, is limited to people who are living nearby or in the same city or town ,so it normally takes time. With blockchain and property tokenization, these are not an issue at all. An investor from say USA is now able to purchase a property-backed token which is physically located in Dubai or anywhere else across the world. Furthermore, almost all investors are able to easily purchase a tokenized apartment, as they are able to buy a fraction of the apartment and not the whole lot! More importantly the market is open 24/7/365!

3- No intermediaries and less cost

You have most probably gone through the process of buying a property. There are quite a few middlemen such as the broker, accountants, lawyers, loan and insurance brokers that you must be paying for their services, once you buy a property. Thanks to the smart contracts introduced by blockchain networks, there is no need for those services anymore. The whole procedure, including ownership verification, money transfer authentication and legal works will eventually be taken over by smart contracts at no or very low cost. As such, the process of buying and selling a property or a share of a property will be more cost-effective and efficient.

4- Transparency 

Transparency makes a market efficient. Blockchain network provides the most transparency by making information accessible to all peers on the network. That is the most efficient way to make a market transparent. Besides, the information is verifiable to all peers, so both sides of the transaction can easily trust and execute the deal. By enforcing smart contracts the efficiency and trustworthiness would reach to its highest level.

Conclusion

Tokenized assets in general and tokenized properties in particular are attracting more investors these days. There are several advantages associated with real estate tokenization such as possibility of fractional ownership, liquid and efficient real estate market, less cost and more security and transparency. 

Even though the blockchain industry is still suffering from lack of knowledge by the majority of people and more importantly insufficient regulation across the globe, the horizon looks bright because of the great values that blockchain is able to add to the real estate market.